The Morning Risk Report: France Heralds New Anti-Corruption Law

After months of debate and various iterations, France’s lawmakers are set to approve new anti-corruption legislation today that will bring the country’s arsenal for tackling corruption and bribery closer in line with that of other developed countries.

The new law, dubbed Sapin II after Minister of Finance Michel Sapin, will create a dedicated anti-corruption agency that is in charge of ensuring organizations implement compliance programs that are becoming mandatory under the law. The legislation will change the compliance landscape for French companies, said Thomas Baudesson, partner in the regulatory enforcement and white collar crime practice at Clifford Chance in Paris. “We will have the ‘stick’ approach, a company must have a compliance program,” he said, instead of the “carrot” approach of other jurisdictions, where compliance programs aren’t mandatory but any violation of anti-corruption or bribery laws may lead to severe financial penalties. “If a company…has not put in place a program compliant to the law it will be subject to sanctions…and what’s important is that the individual head of the company will get the main fine of 200,000 euros,” said Mr. Baudesson. The fine, he said, is a personal liability unlikely to be covered by insurance. The requirement to implement a compliance program applies to companies that employ at least 500 people and have revenue of at least 100 million euros. “This is a huge change in legislation because, for domestic companies, it’s coming from almost nothing in terms of anti-corruption compliance programs,” said Mr. Baudesson.

Another provision of the Sapin II law is the introduction of a whistleblower program with anti-retaliation protection. Whistleblowers will get a guarantee that their identities will be kept secret and, like in the U.K., there will be no financial compensation for reporting wrongdoing. The law will introduce deferred prosecution agreements, opening the way for civil settlements in cases where a company is found to be breaking anti-corruption law. That would give prosecutors ways to close “more cases more frequently,” said Saskia Zandieh, a compliance and white collar crime counsel at Miller & Chevalier in Washington. But it is still too early to tell how it will work in practice, as there’s no incentive, such as reduced penalties, for companies to self-report wrongdoing. “The law has the potential to significantly change the landscape in France but it will depend largely on the funding that goes to prosecutors and the new agency,” said Ms. Zandieh. One thing she foresees will be smoother is, in the case of enforcement by a foreign prosecutor, French companies will likely be able to choose a monitor from their own agency. “French companies tend to be very hesitant to have an American monitor, for instance, but with the French anti-corruption agency overseeing the process, it will be less of an uphill battle,” she said.

Crisis of the week: Tata Group. The crisis this week features India-based conglomerate Tata Group, which ousted its chairman, Cyrus Mistry, last month in a surprise move, replacing him with the man who held the job before him.

Cyrus Mistry, former chairman of Tata Sons, on Oct. 26.

European Pressphoto Agency

COMPLIANCE

SEC likely to get new chairman. The Securities and Exchange Commission is likely to get a new chairman no matter who wins Tuesday’s presidential election, raising doubts about the agency’s priorities, the WSJ reports. The SEC has yet to complete three major initiatives that would change corporate financial reporting. A new leader could shelve work on rules governing the disclosure of executive pay, corporate sustainability efforts and a push to streamline financial filings, a signature project of the agency’s current chairman, Mary Jo White. An incoming chairman also could revive rules requiring companies to report their political spending, which Ms. White dropped from the SEC’s agenda, or focus on new issues, shifting the regulatory outlook for corporate America.

EU may target Amazon for taxes. Amazon.com could be in the crosshairs of Europe’s taxman, and the stakes for the Seattle online retailer are high, the WSJ reports. After the European Commission ordered Ireland to claw back 13 billion euros (about $14 billion) from Apple in August, other multinationals such as Amazon and McDonald’s Corp. face their own reckoning. Brussels is scrutinizing their European tax deals to determine if they constitute illegal “state aid,” benefits that could give them an unfair advantage over rivals.

RBS to compensate small businesses. Royal Bank of Scotland Group PLC said Tuesday it was setting aside £400 million ($496.2 million) to compensate small-business owners who alleged they were pushed into default by the bank’s restructuring unit, the WSJ reports. The bank said it was creating a system to refund fees extracted from struggling small businesses that were put into its Global Restructuring Group in the aftermath of the financial crisis. Hundreds of small-business owners alleged that GRG forced them to default on loans so that the bank could charge higher fees or seize their properties and sell them.

Samsungoffices raided. South Korean prosecutors raided the offices of Samsung Electronics Co. on Tuesday as a growing political scandal surrounding the country’s leader drew attention to influential conglomerates, the WSJ reports. The raids came as authorities proceed with an investigation of Choi Soon-sil, a longtime confidante of President Park Geun-hye, whose public standing has been tarnished by the association. South Korean media has reported claims that Ms. Choi exerted influence over public affairs, despite having no official role in government, and that she used her political and business ties to benefit her daughter, an equestrian athlete. A lawyer for Ms. Choi couldn’t immediately be reached for comment.

U.S. launches China steel probe. The Commerce Department on Monday launched two new investigations into whether Chinese steelmakers are shipping metal to the U.S. via Vietnam to evade U.S. import tariffs, the WSJ reports. The moves follow complaints made in September by U.S. makers of steel, who say Chinese mills are making steel and then shipping it to Vietnam for processing, in effect laundering the steel as Vietnamese.

Vietnam has emerged as the U.S.s biggest new source of steel this year.

Reuters

U.S. lawmakers urge Mylan probe. Lawmakers continued criticizing Mylan NV over its EpiPen injector, with two leaders of the Senate Judiciary Committee calling for the Federal Trade Commission to review whether Mylan engaged in anticompetitive practices, the WSJ reports. Committee chairman Sen. Charles Grassley (R., Iowa) and Sen. Patrick Leahy (D., Vt.) said in a letter to the FTC that the agency should look into issues including school contracts that restricted purchases of EpiPen competitors.

Charges over Iran transactions. Reuters reports the brother of a Turkish gold trader has been indicted over allegedly breaking sanctions laws by trading with Iranian government entities.

FBI warns of continued cyberattacks. Online attacks launched from thousands of connected devices, such as one that disabled parts of the internet in October, are here to stay, the Federal Bureau of Investigation is warning, the WSJ reports. “The exploitation of the ’Internet of Things’ (IoT) to conduct small-to-large scale attacks on the private industry will very likely continue,” the FBI wrote in an Oct. 26 bulletin to private companies. A person familiar with the matter said a version of the bulletin that appeared on the internet Friday was authentic.

U.K. says Tesco theft 'unprecedented.' Andrew Bailey, chief executive of the U.K.'s Financial Conduct Authority said the theft of money from 20,000 accounts at Tesco Bank is "unprecedented" and it isn't known how it happened, Reuters reports.

GOVERNANCE

Lumber LiquidatorsCEO resigns. Lumber Liquidators Holdings Inc. said Chief Executive John M. Presley is resigning and named the flooring retailer’s chief operating officer, Dennis R. Knowles, as his successor, the WSJ reports. Mr. Knowles, 52 years old, who has been Lumber Liquidators’ operating chief since March, also will retain that title. His previous experience included a number of positions starting in 2001 at Lowe’s Cos., most recently as the home-improvement retailer’s chief store operations officer.

REPUTATION

Soylent points to algae for sickness. Protein drink maker Soylent said an algae-based ingredient is to blame for the making consumers sick, Bloomberg reports. In October Rosa Foods Inc., manufacturer of the drink, stopped selling its powder mix and recalled its protein bars.

RISK

Saudi govt to speed corporate payments. Saudi Arabia’s government has pledged to pay the money it owes to the country’s private companies by the end of December, the kingdom’s latest effort to contain economic fallout from the slide in oil revenue, the WSJ reports. A Saudi government body, headed by the country’s deputy crown prince Mohammed bin Salman, said it has put together “a package of solutions” to “complete payments of amounts owed to the private sector,” the official Saudi Press Agency reported late Monday. It didn’t provide financial details on how much it owes the private sector.